Nortel Network patents sell for staggering $4.5 billion

OTTAWA -- Nortel Network's rich patent portfolio has sold for $4.5 billion, more than than five times the original starting bid in the last significant auction of Nortel assets.

The winners are a consortium of major technology players, including Ericsson and Research in Motion, who stopped Google from claiming the intellectual property trove.

The big price tag will be welcome news for hard-pressed Nortel pensioners, employees waiting for severance cheques, small suppliers and major debt holders. The previous sales of all Nortel operating businesses has generated just $3.1 billion. Nortel has estimated total creditor demands at $11.1 billion.

Google's opening bid of $900 million in the auction was trumped by a consortium of companies willing to pay more for the 6,000 patents: Apple, Microsoft, Ericsson, Research In Motion, Sony, and EMC.

Nortel's top remaining executive said the bidding which started Monday and ended Thursday was "very robust."

"The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world," said George Riedel, chief strategy officer of Nortel.

Nortel said it hoped to close the transaction in the third quarter.

In April, Google made a stalking-horse bid of $900 million for the patents, some of which are related to the 4G wireless technology known as long-term evolution. The patents cover a rich range of optical, semiconductor, wireline and networking software.

The Google offer was interpreted as a defensive move by the search engine giant, which was seeking intellectual property rights to shield itself from lawsuits.

The sale of the patents to several companies, rather than just one primarily interested in fending off lawstuits, could be good news to Mosaid Technologies and Wi-LAN, two Ottawa patent licencing companies. They could now get a chance to pick up some patents in secondary sales from the winning bidders and the United States, Nortel said. Some 2,600 of the patent assets are American. A joint hearing has been scheduled for July 11.

Nortel was the biggest telecommunication company in the world in 2000 with sales of more than $30 billion. Even after accounting scandals and mismanagement, it was generating $11 billion in sales in 2008. It filed for bankrutpcy in January 2009 and has been trying to wind up business.

A major issue is how to divide the assets between contending creditors around the world. Warren Winkler, the chief justice of Ontario, will try to mediate a settlement after courts in Ontario and the U.S. ordered the parties back to the bargaining table.

Ericsson, which bought the bulk of Nortel wireless operating business as well as Asian joint ventures, said that it bought $340 million in patents in the auction. Research in Motion bought $770 million for patents at the auction.